Embattled tech behemoth Intel Corp (NASDAQ:INTC) received not one but two lifelines. Earlier on Monday, Japanese investment behemoth SoftBank (OTC:SFTBF) (OTC:SFTBY) announced that it would acquire a $2 billion stake in the struggling chipmaker, purchasing shares at $23 each.
The White House confirmed the next day that it is negotiating a deal under which the U.S. government would take a 10% equity stake in Intel in exchange for outstanding CHIPS Act grants. That twin boost of support initially pushed Intel stock higher. However, on Wednesday, the stock fell almost 8% as investors awaited the government’s decision on the stake purchase and processed the possible consequences.
This raises the inevitable question for ETF investors: What does this mean for semiconductor funds?
- Intel shares are in the red today. Check its live prices here.
Intel-loaded ETFs Could Benefit
Three of the most popularly traded semiconductor ETFs, all have Intel as a meaningful holding. As of Aug. 19:
- iShares Semiconductor ETF (NASDAQ:SOXX), 4.3%
- Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ), 4.3%
- VanEck Semiconductor ETF (NASDAQ:SMH), 4%
The SPDR S&P Semiconductor ETF (NYSE:XSD), an equal-weighted product, has a lower Intel presence at slightly more than 3%.
That positions these funds to profit if Intel continues to rise on SoftBank’s support and Washington’s national-security drive.
Also Read: With Intel’s SoftBank Deal Fueling Competition Fears, AMD Stock Slides Despite Bullish AI Outlook
Tailwinds confront turbulence
Yet investors might need to dial back their optimism. An ownership stake in a top chipmaker by the government is practically unheard of, except during a financial crisis. Federal ownership comes with risks, analysts caution, including political baggage, regulatory overhang, and less-responsive corporate decision-making, all risks that passive ETF investors can’t avoid.
Meanwhile, the execution gap is still wide. Intel’s foundry business has not yet secured marquee customers. Meanwhile, Nvidia Corp (NASDAQ:NVDA) and Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) are taking the AI chip boom by storm. Without tangible progress there, capital infusions might not be turned into long-term growth.
For SoftBank, the Intel investment is part of a larger AI chessboard. SoftBank already owns chip designer Arm Holdings PLC (NASDAQ:ARM), is taking over Ampere Computing, and has invested billions in OpenAI.
If Intel’s foundry plans overlap with SoftBank’s AI network, that could ultimately transform the semiconductor supply chain and add another layer of complexity for AI-focused ETFs to ponder.
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